Interview with Mark Colombo

Colombo: Based on work with our customers, I've identified three key trends that I think will have increasing implications for business during the next few years: 1. Increased globalization of business; 2. The accelerating shift to collaborative commerce; and, 3. The development of increasingly powerful supply chain visibility and event management tools. I firmly believe that these trends will shape the way supply chains are managed during the next several years.

ASCET: Globalization has been underway for some years. Why do you think it will continue to be of a major trend?

Colombo: Companies continue to seek efficiencies by leveraging the global marketplace, which has increasingly necessitated the need to work with trading partners located around the World.

Even those companies that have been expanding their global footprint for years find that managing a global supply chain is a daunting task. First, international trade is often built on relationships. These relationships must be built over time, and in a way that respects and bridges cultural differences.

Second, the complexities of global trade can make sourcing decisions very complicated. Companies must factor in the cost of customs duties and tariffs, taxes, other governmental charges, transportation costs, port handling fees, trans-loading fees, insurance, finance and other fees when calculating the total landed cost of shipment. Those companies that don't factor in these costs can make very costly mistakes.

Third, trading across borders is highly complex and dynamic. Rules and regulations are intricate and fluid, and differ from country to country. Global companies must master a myriad of details in each of the countries they trade, including customs and regulatory issues, duty, trade agreements, quotas, taxes, and ensure compliance with denied party screening and duty drawback rules.

Finally, global operations are often fragmented. Shipping product often involves multiple handoffs between a number of carriers and other providers. While major transportation companies, 3PLs and freight forwarders are striving to establish global transport and forwarding capabilities, no provider I know of currently offers end-to-end visibility on a multi-model basis at the package content level (as opposed to the shipment level visibility pioneered by FedEx in the 1970s).

This means that moving goods from China, for example, often requires working with multiple modes and multiple carriers — whose operations aren't integrated. These multi-leg shipments are very complicated, especially where the handoffs occur. Continuity of operations can become problematic, as there are often significant gaps where companies don't have visibility of their shipments.

While there are a number of technological tools available today that facilitate international trade, operating globally is still a very challenging task, and will remain so for some time.

ASCET: What about collaborative commerce?

Colombo: The shift to collaborative commerce has been made possible by the e-business revolution, which enabled and streamlined internal business processes. Traditional e-business involved one-to-one relationships, such as a manufacturer mapping individual electronic data interchange (EDI) processes with each of its suppliers.

Collaborative commerce has moved several steps beyond e-business. Multiple trading partners are connecting electronically — through EDI and, now, via the Internet — in complex supply webs, working together in many-to-many global relationships to achieve common goals.

The efficiencies gained are quite significant. For example, a manufacturer traditionally transmitted its forecasts to its top suppliers, who passed on the plans to their suppliers, and so forth. Today, the manufacturer can push the forecast information simultaneously to five tiers of suppliers, sharply increasing their ability to plan and cutting many days' worth of inventory out of the supply chain.

Collaborative commerce requires seamless communication between trading partners. Integrating each trading partner electronically can be very painful, and takes an incredible amount of time. That's why a number of companies are evaluating options that enable them to leverage others' investment in connectivity, such as supplier hubs and private trading exchanges.

We're beginning to see the formation of information hubs for moving and sharing documents within a global network. The shared infrastructure will eliminate the need to map data for individual trading partners, thus minimize integration effort, reduce the cost of establishing connectivity, and increase speed to market.

ASCET: What happens when companies that operate globally embrace collaborative commerce?

Colombo: The challenges increase exponentially. A company with global operations may find that linking electronically to its trading partners is a complex process that can stretch from months to years, at a substantial cost.

Data quality is one of the biggest challenges when working across borders. For example, say that a shipment from Panang is to be received at Los Angeles International Airport, but that a data entry person types in LA, rather than LAX, as the destination. Or perhaps a container scheduled to arrive in Long Beach is routed to Los Angeles. Take the time stamp that indicates receipt of a shipment, which is typed in at 1420 hours. Is that 1420 hours Shanghai, London, or Memphis time?

Handling such seemingly small but incredibly important details requires the development of business rules that catch the inaccurate data, plus systems that manage the logic behind the data. This involves a staggering amount of time and expense to set up and manage on an ongoing basis.

We at FedEx have been working very hard on resolving these issues by developing collaborative information hubs around our services. We have developed pre-integrated solutions that can help take some of the pain out of connecting trading partners around the globe. These solutions include a pre-integrated network of carriers and third-party providers linked through our global information networks. For example, FedEx Net®, our own secure Value-Added Network (VAN), provides a pre-integrated network that delivers redundant, reliable connectivity available 24/7/365 for FedEx customers to view and transmit information throughout the world.

ASCET: What about the third trend, the development of visibility and supply chain event management tools?

Colombo: These rapidly developing tools, when properly applied, will help companies resolve many of the challenges involved in globalization and collaborative commerce. But, the level of visibility varies, depending on the technology.

FedEx was one of the first companies to provide shipment visibility, dating back to the late '70s when we introduced the industry's first standard track and trace capabilities. However, companies today are increasingly requiring inventory visibility. So, today we can provide content level visibility providing more detailed shipment information, such as what SKUs are contained in a particular carton in a particular shipment, and tie it all to the bill of lading and/or purchase order.

By generating alerts based on events — such as when a shipment is held up in customs — these tools provide notification capabilities that can be pushed to anyone in the supply chain that subscribes to that information, enabling proactive event management. For example, we could send messages to any number of people, notifying them when a package has been picked up and when it is delivered. A customer can define events they want to be notified on, such as when a shipment clears customs. Order detail, such as what parts are contained in a particular container, can be added to the notification enabling companies to gain complete visibility of their inbound orders from even the smallest suppliers. By pushing information to other partners in the supply chain and enabling real time inventory visibility, you can reduce your dependence on forecast information.

There is a downside to having access to so much information. Say that you subscribe to data on transportation movement. On a typical transportation move, you may get 20 or more updates. If you store all of that data in a database, your database becomes very large. If you're not careful, visibility costs on a per Shipment basis can become as expensive as the goods being moved. That's why companies are looking to partners such as FedEx that can transform the vast amount of supply chain data into business intelligence that enables them to make more informed decisions.

Visibility and supply chain event management tools have the power to solve complex supply chain challenges. Imagine that a computer company has implemented a merge-in-transit strategy, buying components from different suppliers around the world. This computer company uses FedEx EMerge®, our merge-in-transit solution, to consolidate all of the components of an order so that they can be delivered as a single unit to the customer. Say that the order consists of a monitor that is being sent by one supplier, the server by another, and accessories and peripherals by a third.

Supply chain visibility and event management technology would enable FedEx to track each of the components of the order. If the monitor gets hung up anywhere in the supply chain, we can notify the client via an exception alert (by email, fax, or to the client's cell phone or pager) and, depending on the business rules, notify them that we have routed the monitor by air while shipping the other components via ground. The client might ask to be notified electronically when all of the components are received at our consolidation center, and again when the merged shipments are received by the customer.

Or the business rules could be written so that a replacement monitor is shipped from the company's distribution center, and the monitor that is held up in the supply chain is rerouted to that distribution center - or any other location.

The possible applications for visibility tools and supply chain even management are endless, and their potential for improving supply chain performance is great.

ASCET: What implications do these trends have for FedEx?

Colombo: We are leveraging our extensive information and physical infrastructures to build a reliable, secure, global network. While visibility is relatively simple when you're tracking shipments by a single carrier or by a single transportation leg, it becomes much more complex when you try to manage it across carriers and modes. We are working towards a future where we will be able to move globally a shipment of any size - from a small parcel to heavyweight freight - seamlessly through the FedEx network, maintaining custodial control of the shipment and providing customers with complete end-to-end information about the shipment.

We are doing this by bundling the transportation and information capabilities across our global, multi-modal operating network into solutions that provide reliable delivery, a single point of contact, and end-to-end custodial control. For example, FedEx Trade Networks (FTN) has bundled services to provide Ocean-Ground Distribution and Air-Ground Distribution services. FedEx manages the entire process from origin to destination, providing customers with cost-effective solutions that enable them to ship from Asia and Europe to multiple destinations within North America through a single point of contact.

While services will be integrated, each of the operating companies will continue to operate independently. We fundamentally believe that they run best on their own, for how an airline is operated is much different from how an LTL carrier is run.

The challenge is to help our customers use information to manage their inventory at rest or in motion, across carriers, across modes, across borders, and across enterprises. We're doing this by delivering Synchronized ReliabilitySM - using information and assets to orchestrate and accelerate supply chain activities so that customers receive what they want, where they want it, and when they want it.